ANALYTICS EXAM 1

Bad decision

Does not consider all alternatives Does not consider all available info Can lead to positive outcomes

T/F: A payoff table is used to organize states of nature, decisions, and payoffs

True

T/F: unbounded solutions suggest that the objective function value becomes more and more optimal in the unbounded direction

True

3 steps in modeling

formulate (define problem, develop model, acquire data) solution (develop solution, test solution) interpret (analyze solution, how sensitive is your answer to changes in market, implement solution)

no combination of decision variables that meet all of the constraints

infeasible solution

no limit to min/max

unbounded solution

one combination of decision variables that provides max/min quantity

unique optimal solution

Opportunity costs are equated with _______

Regret

Corner points represent...

A point at which a set of constraints intersect

5 steps in the decision making process

1. Define the problem 2. List all of the alternatives (options) 3. Identify the outcomes for each alternative (state of nature) 4. Identify the payoff for each combination of alternatives and outcomes 5. Pick a decision analysis technique and make a decision

properties of linear programming: 1. model represents a ___________ problem 2. ________/________ some quantity 3. model has ___________ 4. must be ____________ available 4. model is ____________

1. business 2. max/min 3. limitations (constraints) 4. alternatives 5. linear

Assumptions about linear programming: 1. ___________ with assumptions 2. _____________ 3. ______________ 4. _____________

1. certainty 2. proportionality 3. additive 4. divisibility (solution doesn't need to be whole number)

basics of decision modeling: 1. model will represent ___________ 2. provides clear ____________ 3. saves __________ and ____________ 4. could be the only reasonable way to solve ____________ problems

1. reality 2. recommendations 3. time, money 4. complex

It's worse to make a...

Bad decision with a favorable outcome, because you just got lucky and you think you did the right thing and will continue to make bad decisions which don't work

Good decision

Based on logic Considers all options Consideds all available info at time Will sometimes give unfavorable results

T/F: adding more constraints will lead to a more optimal answer

False

On a graph, the region mapped by the constraints containing values of the decision variables that are allowed by the constraints set are called?

Feasible region

Which technique chooses the best of the best payoffs

Maximax

Mimi max regret =

Monday morning quarterbacking

Maxi Max =

Optimistic (good for venture capital)

Maxi min =

Pessimistic (good for banks)

more than 1 combination of decision variables that provides some max/min quantity

multiple optimal solution